The IMF Managing Director warned that countries need to build fiscal buffers.
Policy makers should prepare for more market volatility amid further financial tightening and “a bit choppy” waters in the global economy stemming from trade tensions, said Christine Lagarde, managing director of the International Monetary Fund.
“Our message was very clear: de-escalate the tensions, and open and reform the dialogue,” Lagarde said in an interview Sunday with Bloomberg Television’s Haslinda Amin, at the conclusion of the IMF and World Bank meetings in Bali, Indonesia.
As for officials’ ability to deal with the next financial crisis, Lagarde said there is “still, now, limited policy space” but that the banking system is “much stronger” with better supervision and regulations, less non-performing loans and “still sensible” leverage.
Countries must build monetary and fiscal buffers, citing the flexible exchange rate as playing a “very good role as a shock absorber,” she said.